World Crisis

and Its Impacts on Brazil

Minister of Finance
Guido Mantega

2011 Brazil Economic Conference

Brazilian-American Chamber of Commerce
Washington, September 23, 2011
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Global economy has deteriorated in the last

months
 The 2008 financial crisis was not overcome in advanced
economies.
 Pessimistic analysts mention new financial crisis and recession (or
stagnation) in advanced economies.
 The US economy is at a slow pace, but the core of the crisis is
currently in Europe.
 European leaders are taking too much time to solve Greek and
other countries’ troubles and to capitalize European banks.
 Day after day the crisis is deeper and its solution is more
expensive.
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What will happen to emerging economies such as Brazil? If crisis does not
become worse: low growth in developed economies, but emerging
countries could continue to grow
GDP growth forecast, in % YoY

Source: IMF World Economic Outlook (June 2011)

Produced by: Ministry of Finance
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Emerging markets will sustain global economy in the coming years

Average GDP growth forecast, in % YoY

Source: IMF World Economic Outlook (June 2011)

Produced by: Ministry of Finance
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Emerging economies grow above average

Real GDP, in quarterly percent change vis-à-vis one year earlier

Source: IMF
Produced by: Ministry of Finance
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Crisis of confidence
Consumer confidence returns to 2008 levels
US consumer confidence index, in basis points, and annual change of household consumption, in %

Source: Conference Board and Standard & Poor’s

Produced by: Ministry of Finance
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Emerging countries’ contribution to global economy on the rise

Share of total world GDP growth, 2010-2019, in %

Source: Goldman Sachs

Produced by: Ministry of Finance
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Consumption will be stronger in BRIC countries

In 2009 US$ billion

N-11 (Next-11): Eleven most populous emerging Source: Goldman Sachs

countries after the BRICs. Produced by: Ministry of Finance
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Brazil is prepared to face crisis deterioration

International reserves
In US$ billion

* On September 21st, 2011. Source: Central Bank of Brazil

Produced by: Ministry of Finance
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More confidence in Brazil

5-year CDS (Credit Default Swap), in basis points

Source: Moody’s
* Updated on September 21st, 2011. Produced by: Ministry of Finance
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Brazil has a large and dynamic consumer market, making

the country less dependent on foreign economies
Retail Trade Survey (Broad), trade annual real growth, in %

* Accumulated in 12 months, by July 2011. Source: IBGE

Produced by: Ministry of Finance
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Great increase of middle class

In % share of population*

* Household monthly per capita income per classes at 2009 prices:

A/B class: more than R$ 4,800
Source: Economatica Financial Consulting
C class: between R$ 1,115 and R$ 4,800
D class: between R$ 804 and R$ 1,115 Produced by: Ministry of Finance
E class: up to R$ 804
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Sound fundamentals
Inflation rate, 12-month up to August

Source: The Economist, September 9th, 2011

Produced by: Ministry of Finance
* On a 12-month basis up to July, 2011.
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Sound fiscal situation when compared to other countries

Budget balance forecast, in % GDP

* The Economist (September 17th, 2011 edition) Source: The Economist

** For Brazil: Ministry of Finance forecast Produced by: Ministry of Finance
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International crisis challenges for Brazil

 FISCAL CONSOLIDATION
 Achieve high PRIMARY RESULTS in 2011, 2012 and afterwards
 Control new CURRENT EXPENDITURES
 Create fiscal space to continue expanding INVESTMENTS and TAX
EXEMPTIONS
 Create conditions to reduce INTEREST RATES
 NEW MIX OF FISCAL-MONETARY POLICIES
 TRADE DEFENSE: Federal Revenue and MDIC measures
 CURRENCY WAR:
 Reserves
 Taxation
 Derivatives
 Incentives to innovation and local content
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Exchange rate comparison

In index (basis Aug 1st, 2011 = 100)

Source: CMA
Produced by: Ministry of Finance
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Exchange rate comparison

In index (basis Aug 30th, 2011 = 100)

Source: CMA
Produced by: Ministry of Finance
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 To conclude: The emerging countries performance

depends on the evolution of the current crisis.
 The 2011 challenge is no greater than 2008.
 In 2008, governments were fast in their decisions,
audacious in their measures and managed to
coordinate joint actions…
 … which restored confidence.
 Now, in 2011, we have to repeat behavior:
• Courage
• Fast decisions
• International coordination